MARKET REVIEW

Global. The MSCI Asia ex-Japan index fell 2.8 pts to 628.3 amid lingering worries of stagflation due to soaring inflation (core US Aug PCE price index spiked to three decades high at 3.6% YoY), skyrocketing commodity prices and supply bottlenecks, the US debt ceiling impasse and Evergrande’s debt woes (missed two USD bond interest payments in the past two weeks). Oil prices surged (+2.5% to USD81.2) as OPEC+ kept to its plan to not boost output further, while the Dow (-0.9% to 34003) and Nasdaq (-2.1% to 14472) slumped amid worries over surging inflation and Fed’s tapering that could undermine the global economic recovery. Sentiment was also soured by concerns about a potential US government debt default before 18 Oct as the US debt ceiling deadlock continues.

Malaysia. Tracking a 2.2% rout in HSI following a trading halt in the embattled Evergrande, KLCI eased 2 pts to 1522.5 to record its 3rd straight decline. Market breadth remained negative for a 7th session as the losers outnumbered the gainers by 517-to-482 stocks. For the 3rd day in a row, foreigners remain net sellers (-RM84m; 5D: -RM433m) whilst retailers also joined the queue with a net selling amounting to RM19m (5D: RM99m) in equities. The local institutions were the only net buyers amounting to RM103m (5D: RM334m).

TECHNICAL OUTLOOK: KLCI

After rising from a low of 1483 on 4 Aug to a high of 1605 on 1 Sep, strong profit pullback saw the index tumbling 5.2% or 83 pts to end at 1522 yesterday. Following the decisive fall below the 50D SMA (near 1537) and support trendline (near 1533), the index is likely extend its consolidation mode this week. A breakdown below 1500-1510 supports would witness the index to revisit 1483 zones. On the upside, the index must swiftly reclaim above the 1533-1537 resistances to advance further towards 1544-1558 levels.

MARKET OUTLOOK

In the wake of multiple external headwinds, renewed foreign liquidations and investors’ concern on possible new taxes in Budget 2022, KLCI is likely to experience heightened volatility in the coming days. Nevertheless, we expect key supports near 1480-1500 levels, underpinned by further reopening of economic sectors given the improvement in the local pandemic situation. Key resistances are located at 1533-1544-1558 levels.

Source: Hong Leong Investment Bank Research - 5 Oct 2021